Monday, 31 October 2016

Otti has misfired. They are not the first and wont be the last using equity crowdfunding to promise loads and deliver nothing.

Now they are back for more cash - a tiny amount at a company valuation of £500k.

At least Crowdcube have been honest about their previous raise and the lack of delivery. But you have to ask why anyone would trust the latest projections when the last ones were a joke. Competition is hot in this space and it seems obvious to us that this crew hasnt got what it would take to make this work as anyhting other than a small t/o smalltime owner business.

We came across someone recently who was in the process of raising money for their business using equity crowdfunding.

The business had a good level of support from HNIs but there was an issue over EIS due the length of time the business had been running.

As part of our conversation I was told that EIS was an essential part of the HNIs participation - they wanted their 30% rebate or they would not back the project.

This strikes us as being back to front. If you believe an idea or business is investible then it has to investible with or without EIS. Receiving a 30% tax break when you lose all of your investment makes you a loser - not a HNI.

Agreed both SEIS and EIS are useful derisking tax breaks but they should certainly not be making the investment decision. This is not the first instance we have come across where ECF investors have leapt blindly off a cliff simply because they know that the fall is not the full distance. Fact is it is still a fall and is still very likely to end in tears.

This reliance on tax rebates is also skewing the market from the entrepreneurs' perspective. Many companies over 7 years old, or outside the time limit for these rebates, would make good investments based on the business fundamentals. A few use ECF but most are scared off by the overwhelming numbers showing how qualifying for S/EIS makes for a successful ECF pitch. Likewise, many non starters get funding simply on the basis of these breaks.

What is the purpose of the 7 year limit? Why 7? Shouldnt we be encouraging businesses that have succeeded for 7 years or more to expand by allowing them also to access this new funding. God knows, it might even produce some decent ROI.

Sunday, 23 October 2016

Oliver Pugh is the founder of Early Bird. Early Bird is in liquidation having lost investors around £600k and creditors a whole pile of cash.

This article has been amended after it was pointed out that some of our facts were not entirely correct. We have included corrections in red.

Oliver, through some deal with the liquidators, seems to have now relaunched EB and is appealing for funding via his Linkedin page. How this is allowed is beyond us. Oliver is not appealing for new funding - this is an old entry at the top of his Linkedin page here - why not try to update it Oliver?

Oliver Pugh

Currently raising new equity investment round for EarlyBird : Contact me for your free investment pack in the post.

Assets valued by Oliver in the accounts for EB at over £100k are now valued by the liquidators at £250. This includes £38k worth of stock which according to the liquidator is past it's sell by date and has been destroyed. This is all stock purchased by EB in the last 9 months as the previous accounts reveal a zero position.Oliver has asked the liquidator if he can purchase the EB client list.

Not once since Oliver started EB has he managed to get even close to the figures he claims for the business. On Crowdcube he claimed lots and delivered zero; twice. He then went to Envestors, where he gave inaccurate historic figures for turnover according to the platform and once we had told the platform of his previous debacles on CC, they took his pitch down. His projected turnover on Envestors went from £40k to £1.4m in 12 months - the same 12 months the business has spiralled into the ground. So much for due diligence.

A previous company he claims to have started called Event Hire Company Ltd -(Eventhirecompany.com ltd) he claims he sold in 2015 on his Linkedin page. But there was nothing to sell and no evidence it was sold. Accounts are now 6 months OD, Oliver is still the only director and shareholder. Oliver has explained that he sold the assets of this company in 2015 - not the company as his Linkedin page states. We cannot give you a figure for these assets but its fair to say they were not worth much in the last filed accounts. The accounts are OD by six months simply because the company has ceased to trade and Oliver thinks its fine to leave the loose ends dangling.

You might ask why the Crowdcube DD department did not pick up this very simple and very obvious lie on Oliver's Linkedin page - it would have given them a red light. But despite the assurances that are continually issued by Luke Lang and DarrenWestlake, that CC's DD department uses state of the art tech to check all businesses and owners, they failed to spot this glaring, gyrating, ghetto blaster of a warning. Twice. Are we surprised. No.

EB's SM is full of complaints from deserted, angry customers.

So is this really the sort of SME activity equity crowdfunding was set up to encourage? What are Crowdcube doing about it?

The liquidator's report makes for interesting reading and we will be running posts on this and the farcical situation that emerged with Envestors, who punted Oliver for £500k only a few months ago, over the weeks to come. As a taster the liquidator's report reveals that the office cleaner has removed one of the company's computers in lieu of payment.

If ever there was an example of why we need to change the system, then Early Bird is it.

PS only yesterday Oliver Pugh was to be found pretending that he knows how to run a business when he was on stage at London Food Tech Week - he is the one on the middle. The promotion said he ran Early Bird Snacks which in itself is a lie as the liquidator does.

Friday, 21 October 2016

As if to emphasise the story below, we have been contacted by a Crowdcube shareholder in Monzo (previously Mondo), the challenger bank that raised £1m on Crowdcube recently.

The Board at Monzo have issued shareholders with some news - which if you read our last blog is at least a good start. However the news is not all good.

In the Crowdcube pitch Monzo talked about the need to raise further funding, approximately £15m. The Crowd would be involved. The Board have now decided that they will raise a separate £4.5m now via VCs. No Crowd.

When we asked this shareholder if he thought this was in the interests of all those who backed Monzo via Crowdcube, he said -

Personally I don't think it's ideal - they should've given the crowd an opportunity to, given they point out they "couldn't have built Monzo" without the Crowd's help - and the Crowd even helped pick a new name for the bank. I'm sure the appetite is there.

What this now does is dilute the crowd's holding which may well have an effect when Monzo come back for another £15m next year, We will have to wait and see. As someone once said, shitting on your own doorstep is never a good idea.

Its is really very depressing.3 times this week we have been contacted by shareholders in companies that funded via Crowdcube, to ask us to help them find out what is happening.

We are of course happy to help where we can - but what the hell are Crowdcube doing? Appearing at Crowdfest to soak up the adulation of their own industry's PRing.

Today's contact came about Chupamobile - which raised £740k on Crowdcube in 2014. Ignoring what they do, what they have achieved to date is waste this money as far as we can tell. Projections showed them in profit for 2015 and making a profit of over £1m for 2016. But the reality is, as it always seems to be, that they have clocked up the losses and continue to do so. Only silently.

That aside, why is it that companies feel they can abuse the very people who funded them? Why are Crowdcube not involved in pushing companies to give a minimum of quarterly updates via email - how long would that take? Where is the bloody FCA when you need them? Stumbling through another review in which they have used the gangsters to advise on the regulation.

Things are clearly not right when a blogger from deepest Scotland is the messenger for so many shareholders. Less preening more action please Mr Williams!

Thursday, 20 October 2016

UP Investments raised £137k on Crowdcube in 2014. They were supposed to be the go to place for crowdfunding.

The company is now to be handed over to White Label Crowdfunding Ltd on a straight share for share deal. UP have stated that their shares are worthless and holders should make negligible value claims - thereby somehow alleviating the fact that this deal wipes out any EIS or SEIS claims (past present or future) that shareholders could make against their UP shares. Claimants already holding rebates will have those deducted from their NVC according to the company.

The founder of UP seems to have carved himself a position with this new company having wracked up losses with UP of over £700k. The founder claims that they failed to raise enough capital. According to their accounts they have raised considerably more capital than their Crowdcube plans showed and have made considerably higher losses.

White Label have no track record, a sole director and little in the way of capital. So what they bring to the party is not entirely clear.

If you shine a light from the right direction you could see this as an exit - its in line with the last one from Crowdcube with Wool and the Gang. Pretty sure Darren Westlake wont be taking questions about this today at Crowdfest- it will be a month at least before he realises yet another one of his successes has gone west.

We have just been sent a letter that all shareholders via Crowdcube were sent today at 11.30, informing them that Crowdcube have just heard that East End Manufacturing are closing.

'So What', we hear you say.

Well we reported this closure on the 6th September - so well over a month ago.

What is it that the enormous team of Crowdcube interns do all day in Exeter? Certainly not servicing their investors. How much surfing can you do in week?

So now we have the very odd situation that if you want to know what is really going on with Crowdcube funded businesses, you need to come here to us. Looks like even Crowdcube may have been using our services to inform their East End Manufacturing shareholders!! Should we ban them?

When Darren has finished bigging up Crowdcube at today's Crowdfest, why not ask him some real questions - about what has really happened to companies that have funded via his platform.

Like Orsto.

Orsto raised £60k in 2014, the projections used by Crowdcube to sell the equity, showed the company making profits of over £500k for 15/16. Accounts now filed show YE Dec 2015 generated losses of £40k, no cash and a balance sheet in the red for the second year running. The item they pitched on Crowdcube and for which people paid no longer exists (it never did) and the company is now just another watch retailer.

Whilst Darren Westlake is Pringing at Crowdfest today and tomorrow, companies funded via his platform Crowdcube, are not doing so well.

Sustainable Power raised almost £2m on Crowdcube in 2014. We wrote about them here

Projections used in the pitch to sell the equity showed the company making a profit of £2.7m for YE May 16. Accounts just filed at CH for the same period show losses of £1.5mYou cant say you weren't warned!Can someone please ask him nicely what this is all about?

Monday, 17 October 2016

Yes thats right - Crowdfest - yet another made up equity crowdfunding backslapping event, trying to paper over the now obvious flaws in the model, has gone one step further.

Mr Ling from AIG will be joining the usual suspects for a discussion on due diligence - something readers here will know we keep an eye on.

Maybe it is fitting that an industry that has such an appalling record of ignoring due diligence and disclaiming all responsibility for it afterwards, should include AIG in the UKCFA event's panel.

After all, in 2008 we saw just how great AIG are at their own DD. CDS ago-go and many billions lost with the US government being forced to step in and buy 90% of what was left of the double gold plated blue chip, largest insurance company in the world. The lawsuits are still rumbling on.

Almost makes me sad to be missing it. Now if they could also get Fred the Shred.....................

For all you caveat emptors, red in tooth and claw, you 'entrepreneurial' go getters who believe blindly that equity crowdfunding is gggreat. Here's one for you.

When a business goes bust, for whatever reason, you can be pretty sure there will be unpaid creditors - the amount will depend on the scruples of the directors. If these unpaid creditors are a result of a plan that was flawed and funded via a model that is also flawed then something should be done to prevent it's repetition - dont you think? Ignoring the idiots (shareholders) who backed the idea, creditors who may have run thorough credit checks and read news items, should be protected from this abuse.East End Manufacturing is one such example. A recent report from the liquidator, not published yet, shows how flawed this business was. It went from this statement on the Crowdcube blog in May 2016 - Our sales topped £1m last year and we are expected to turn a profit for the first time this year, so we are moving in the right direction.To admitting to the liquidator that by June 2016, the business was in dire trouble; ultimately resulting in its closure last month. You have to say that takes some believing.The Crowdcube projections show YE February 2016, that this company was making over £600k net profit. Pure fantasy passed and stamped by the FCA as good to go.So these poor creditors, who being sensible businessmen and women, would have read up on East End Manufacturing, run credit checks and seen the good news story carried by Crowdcube in May 2016. Hey, no problem with this company's credit, they say, we can do business. By their own account only a month later in June the company was toast - having lost 60% of its revenues via 4 customers moving on. Was there no hint of that in May? Again by their own admission during the summer they entirely failed to get any new customers - is that really possible for a business 'moving in the right direction'?The two main trade creditors have been hit with debts of £55k and £47k. Even for a substantial SME those are heavy debts likely to lead to lay offs or even closure. These creditors were misled by output from Crowdcube and the company. For the one owed £55k, this will put the company balance sheet into the red. Likewise the other one is small start up. So where does the responsibility lie? Could this company have run up these debts without Crowdcube? Simply put no. Who ran a piece praising this company and its future prospects just weeks before it was hung. Crowdcube. Have at least two small SME's been very badly damaged as a result. Yes. Is that really a sensible way to help the UK's SME's?Quod erat demonstrandum.

Example - ''On Friday (7th Oct), dog lovers service BorrowMyDoggy officially closed its equity crowdfunding campaign on Angels Den. The company successfully secured its minimum £1 million funding goal as it continues to develop its UK and Ireland dog services.'' The pitch is still open. Example - ''BorrowMyDoggy launched a Crowdcube campaign last year to raise £575,000, but then shut down the initiative after the company secured a £1.5 million investment from IW Capital through Crowdfinders, a crowdfunding event that brings investors and companies together for face-to-face pitches.'' The £1.5m has still not been invested.

So the story told is that BMD pulled out of a successful Crowdcube raise because they had received £1.5m in funding from an event run by Crowdfinders. The investor was IW Capital, apparently. IW Capital is run by the same guys who run Crowdfinders. They are essentially marketeers. They have a loose group of associated ECF companies under the umbrella marketing name Race for Scale. What this actually does in the real world is not entirely clear. Claims that it invested in various companies are not backed up by filings at CH, so we assume they punt investments rather than take them for their own account.

The story goes on to say that Borrow My Doggy have just completed a £1m raise on Angels Den. In fact this a £1.6m raise (according to the platform) and is still active. The money raised so far, £1m, includes £879k from IW Capital (listed on Angels Den as a HNW individual) and the rest is made up by 4 investors - what you might call a very small crowd . For a company claiming to have 300,000 members you might expect a few of them to be investing? IW Capital have told us that Angels Den have their PR all wrong but have not explained exactly what this means.

So a year later some of the money reported as raised does appear to be there - subject to this Angels Den transaction actually completing. Remember the last time someone claimed they had raised £1.5m - they hadnt.Back in April this year the IW Capital press machine was whirring - this is from http://www.techcityinsider.net/four-startups-join-100m-race-to-scale/ - ''IW Capital has committed £1.65m in funds raised for Borrow my Doggy. I love that company, it’s awesome,” said Davis, who is also the chief executive of IW Capital. So that's the same £1.65m that BMD is currently crowdfunding on Angels Den - or is it? April to October is 6 months but no investment even though its was 'committed' - but was it? Who the hell knows. It's like wadding through a never ending mangrove swamp.

Essentially both stories are complete rubbish. They have populated the internet as the truth, been picked up and regurgitated by lazy journalists. They are now facts.

We dont know why they pulled out of their Crowdcube pitch, which was going well. Maybe someone out there does? The Crowdcube projections have been revamped for Angels Den with a much healthier looking EBITDA.

Nicola Horlick's Glenthan Fund raised £150k on Seedrs in July 2013.

This is from the pitch - Glentham Capital would receive a management fee of 2% per annum. If $100 million is raised, the annual revenue of the company would therefore be $2 million.3 years later and the company has achieved very little - if anything, The film fund it was set up to raise of $100m is as far as we know empty and cancelled. As are the company coffers, with the latest (late) filed accounts showing an overall deficit and losses of the year of £200k. We have written about this before - Seedrs also commented that Horlick had guaranteed to replace £250k into the company this year - http://fantasyequitycrowdfunding.blogspot.co.uk/search?q=+glentham but there is no evidence that this has happened that we could find.

Amidst rumours (still to be confirmed) that yet another 2015 success story has come off the rails, Crowdcube have announced Simon Williams as thier new Chairman.

Williams has a a tack record with finance, mainly big finance and certainly has the brains to change Crowdcube. Whether he has the time given his already top heavy commitments to Lending Club and Nerdwallet to name just two, is another matter. His initial comments to Business Insider suggest that he has little idea of the trouble the company is in.

It looks to us to be a PR move, which will hardly come as a surprise. Williams is an investor in Crowdcube so may have decided it was time to get stuck in before it all goes tits up. Crowdcube now have an enviable entourage of sophisticated investors and advisers which under normal circumstances should take any company somewhere.

However is it all a little too late? Only the next 18 months will tell. Crowdcube's PR has promised exceptional deals for 2017, but then they did that in 2015. The very heavy weight of so many failed or fast failing, poorly thought through businesses, that have funded via this platform in their race to scale, may well end up dragging Crowdcube to the bottom along with its glamorous backers.

Tuesday, 11 October 2016

An FCA regulated equity crowdfunding platform has claimed to have raised over £250k for Bedlam Brewery. Bedlam Brewery deny this.

Bedlam are currently on Crowdcube raising £330k. We posted an article on them recently stating that they had raised money on Investden and showing how the projections used then had been missed by several fairways.

To refute this, Bedlam have posted a response on the CC pitch forum stating that they have never raised money on Investden and have asked them to remove the claim - with no response. You can see the Investden claim here

Someone is lying.

Investden are FCA regulated via a proxy arrangement with Clasp Investments, who own and run the platform. If they are promoting false information - the link above clearly states they raised the money from 87 investors for Bedlam, then action must be taken. Of course it wont, but it must be.

Wednesday, 5 October 2016

Where to start with Hen Restaurants? This is the one we mentioned a couple of days ago but didnt give the name.

Here maybe - Philip has grown up in the restaurant industry managing several restaurants and opening two successful London based restaurants..with the opening lines of their Crowdcube pitch. Given that Philip has overseen the burning of £150k of investors' cash in less than 12 months, we would have to disagree.In the final rambling, emotional and rather sad letter sent to investors, Philip demonstrates a total lack of business, let alone restaurant chain, acumen. Most of the letter is spent trying to explain how investors can get back all their losses via SEIS and other HMRC tax breaks. In the rest he just seems totally confused. We think he has missed the point.Lets rewind a little.Philip set up a chicken joint in Brighton. It was quite popular with the folk there. He made a living. He was a successful part of the great British SME culture. Then, he trips over some Crowdcube PR and reads about how easy and cheap it is to raise capital using this new equity crowdfunding thing. Hell, he thinks, I'm having some of that. So a little later, armed with a well thought out business plan and projections to die for, he travels to Exeter to see Crowdcube. The Crowdcube DD department are out to lunch, so Philip's pitch passes muster and he is away. Money raised, no questions asked.Fast forward 12 months and Hen is a sad sight. Doors closed, the business and Philip in ruins. He had run out of cash, by his own admission, despite stating in the next sentence that sales had been good. EH? So if sales are good then he must of lost control of the costs - but he has this trade in his blood according to Crowdcube.Ah there's the rub. A perfectly serviceable small business, with no hope of scaling, is tempted by the Crowdcube PR to expand. Its Business Plan is total nonsense but the investment is raised. The business goes bust in under 12 months. The end.Should we be doing something to prevent this? Well as a parent if you allowed your children free reign to access the sweet shop whenever they liked, then all their teeth would fall out. It's common sense. Of course we should. We had this comment from an investor in Hen, which neatly sums up the problem - 'I've got a few investments on Crowdcube but this is it for me now, don't trust their due diligence process at all.'

This is a script that David Croft would have loved. You can just imagine Battery Sergeant Major "Shut Up" Williams' expression as Private Pugh explains that although investors have lost all their money - in order to claim their 30% tax rebate they have to fork out more cash because Pugh hasnt yet put through the paperwork with HMRC (loud snorts stage left).This is the guy that many people trusted with a lot of cash. And you have to ask why, for instance, the Crowdcube 2015 raise has still not managed to file its EIS paperwork? This was Crowdcube's job, so clearly their EIS department have joined forces with the due diligence crew and are both down the local.It is quite simply - amazing.The good news, if you can call it that, is that Crowdcube have agreed to pay for their EIS paperwork, so Pugh only needs investors to cough up for the other two outstanding applications. Salt and wounds.

Mind you, you wouldnt know that they raised over £200k on Investden only last year - because for some reason Crowdcube fail to mention it.

According to the Investden pitch, the revenue for 2015 was forecasted at £519k, which is great. And whats more impressive is that they projectd growth for 2016 of over 100%. The real revenue delivered by Bedlam was £187k for 2015 and £360k projected now for 2016, which isnt quite so great.

So why, you have to ask, isnt this pertinent information made available to potential investors on Crowdcube? We have absolutely no idea but we are pretty sure Crowdcube do.